Red Lobster, the iconic casual dining chain known for its signature dishes like popcorn shrimp and endless seafood promotions, has filed for Chapter 11 bankruptcy protection.
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The 56-year-old chain made the filing late Sunday, following the closure of dozens of its restaurants.
“This restructuring is the best path forward for Red Lobster. It allows us to address several financial and operational challenges and emerge stronger and re-focused on our growth,” said CEO Jonathan Tibus, who is a corporate restructuring expert and took over the role in March.
Red Lobster plans to use the bankruptcy proceedings to streamline its operations, close certain restaurants, and pursue a sale. The company has entered into a “stalking horse” agreement, indicating plans to sell the business to an entity formed by its lenders.
The Orlando, Florida-based chain has faced increasing competition from fast casual restaurants like Chipotle and Panera, as well as rising lease and labor costs. Its long-standing all-you-can-eat deals for shrimp and lobster have also become more expensive to maintain.
Founded in 1968 by Bill Darden, Red Lobster was intended to make seafood more accessible and affordable for families. Darden, who had previously opened The Green Frog in Waycross, Georgia, was known for his progressive stance against segregation.
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Red Lobster was sold to General Mills in 1970, and Darden Restaurants, which also owns Olive Garden, was later spun off from General Mills in 1995. The chain gained a loyal following with dishes like lobster linguini and its famous Cheddar Bay biscuits.
Comedian and actress Tina Fey famously praised the chain’s biscuits in her memoir “Bossypants,” joking that anyone who disliked them was either lying or a Socialist.
Despite its popularity, Red Lobster struggled to attract younger customers and keep up with competitors. Darden Restaurants sold the chain to a private equity firm in 2014. Thai Union Group, a major seafood supplier, invested in Red Lobster in 2016 and increased its stake in 2020.
Last fall, the company lost millions on its Ultimate Endless Shrimp promotion, which offered all-you-can-eat shrimp for $20. While the promotion did boost restaurant traffic, it resulted in higher costs than anticipated.
Thai Union Group announced in January its plan to exit its minority investment in Red Lobster, citing the impact of the COVID-19 pandemic, industry challenges, and rising operating costs.
TAGeX Brands, a restaurant liquidator, announced last week that it would auction off equipment from over 50 recently closed Red Lobster locations across more than 20 states, including Denver, San Antonio, Indianapolis, and Sacramento.
In its court filing, Red Lobster reported having over 100,000 creditors and estimated its assets and liabilities each between $1 billion and $10 billion. The chain operates 700 locations worldwide.
